Henkel AG & Co. KGaA

Kasper Rorsted – CEO Carsten Knobel – CFO

Harold Thompson – Deutsche Bank Celine Pannuti – JP Morgan Gael Colcombet – MainFirst Hermine de Bentzmann – Raymond James Iain Simpson – Barclays Markus Mayer – Kepler Rosie Edwards – Goldman Sachs Robert Waldschmidt – Merrill Lynch Guillaume Delmas – Nomura

Good morning, ladies and gentlemen, and welcome to our conference call. First, I would like to focus on the key developments of the first quarter 2013, then Carsten will provide you with the Q1 financials in greater detail.

And after that, I’ll close my presentation with a summary of Q1 2013 and the outlook for the fiscal year 2013. And finally, we’ll take your questions.

I would like to begin by reminding everyone that the presentation which contains the usual formal disclaimer to forward-looking statements within the meaning of relevant US legislation can be accessed via our website at henkel.com/ir. The presentation discussions are conducted subject to this disclaimer.

We will not read the disclaimer, but propose we take it as read into the records for the purpose of this conference call. Now, let’s get started, key developments.

We had sales of €4.33 billion for the first quarter, a margin – adjusted EBITDA margin of 14.9%, earnings per share of €0.96 per share, net working capital of 5.8% and our net financial position of €114 million. Overall, a very high quality of earnings on the P&L, the only disappointment or where we’re not quite happy was the top line growth.

All other items were very much in or above our expectations. Now, let me get to some more details.

We saw a strong growth in our fast-moving consumer goods businesses both on laundry & home care and beauty care business. We saw a very strong growth in the emerging markets despite a slowdown of the growth in the emerging markets themselves.

We came back and had solid growth in Latin America and we have spoken to you about Latin America in previous quarters. Our adjusted earnings mark is in all-time high, driven by all three businesses and our net financial position again improved.

So a number of very strong – high number of strong points in the first quarter. What were the areas of challenges and here is where we are not happy or satisfied.

It was clear that the businesses were negatively impacted by weakness in the mature markets. And in this context, let me please distinguish between two different developments.

In our Western Europe, we saw weakness of major industrial sectors, with Western European – Western Europe being in recession, and will continue to be in recession. We saw a slow tide in North America due to de-stocking of approximately 15% and the weakness in the execution, the latter we will clear and I’m happy with and we expect that to turnaround in the second quarter.

That was the one area of deep satisfaction for us in the first quarter. The overall electronics industry continues to the weak start.

I’m sure you’d noticed that the PC industry was down 14% in the first quarter. That is the biggest decline that the PC industry has experienced since 1991.

Despite that, we continue to see very strong earnings in our electronics business. And we had in contrast to 2012, headwind from foreign currency which, of course, has an impact on our overall EPS.

That was the balance of the first quarter, now let me go to the business groups. Our laundry & home care, we saw a very strong organic sales growth, we saw the emerging markets’ organic sales growth being double-digit.

And we also saw the mature markets being positive. The adjusted EBIT margin further increased and also ROCE further increased, so a still water for our laundry and home care business.

We see innovations as a key driver for gross margin and we continue in both our personal and consumer goods business to invest our brands to drive brand equity. We saw a strong increase in brand investments.

On the Persil Duo Caps, we’re the first to launch a multi-chamber caps across Eastern Europe and they’re also in Western Europe now. We continue to drive innovation to strengthen our position in Western Europe.

And as we previously announced, we acquired the PZ Cussons Polish and Russian laundry and home care brand predominantly and we expect growth in the third quarter pending on antitrust clearance. Moving to our beauty care business.

We returned to solid organic sales growth, retail being very strong and hair salon negative, so a very solid quarter when it comes to top line. Emerging market continued its organic double-digit sales growth and the mature markets were also positive.

The adjusted EBIT margin further increased and ROCE also increased. When it comes to innovation, in the US with our license brand, Dial, we have now brought the coconut water trends that is very outspoken in the drinks market to our body market and we launched under Dial brand coconut water.

The oil trend in hair continued and we made further new announcements on the hair care side also including the oil part. Now, let me get to the adhesive technologies.

OSG is below previous year and I told you what the core reason for that was, Western Europe, because of market in North America, which is reduction in inventory but also clearly weakness in execution which we do not expect to reoccur. Emerging market with solid organic sales growth, mature markets below previous year.

However, I want to make certain that we point this out that we had the highest EBIT margin in the quarter, so the adjusted EBIT margin strongly increased due to our effective management of our portfolio within our adhesive business and ROCE further increased. When it comes to portfolio management, we are now doing the rollout of the products and technologies that we acquired from Cytec in 2012.

And at the same time, as an ongoing portfolio optimization, we divested our Chemofast brands which is in the building adhesives business. So, we continue to do brand optimization, which you also see in the strength of our P&L for our adhesive business.

When we look to what our plans or targets, sales was up 2.5% organic, emerging market sales up 8.2%, and earnings per share up 10.3%. So, as far as start of the year, strong positive earnings and thus, satisfied with the top line.

Now, let me hand over to Carsten, which will give you the details.

Good morning to everybody. After Kasper has given you the overall picture, let me now go a little bit more into the financial details.

First of all, let me give you the overview about our key financials for the Q1 2013. Regarding sales, we came in with €4.033 billion, being up related to organic net sales growth of plus 2.5%.

Regarding gross margin, we took some startups being 150 basis points now to a level of 48.6% when it comes to gross margin. And regarding our adjusted EBIT margin, also here, a significant improvement by 120 basis points to a level of 14.9% compared to the 13.7% we had in Q1 2012.

Our EPS adjusted came in with €0.96, being up 10.3% versus the €0.87. This is prior or before adapting to IAS 19.

The comparable EPS figure for Q1 2012 would be 85% and with that, that would translate into an EPS growth of 12.9%. Moving to the cash side and the related KPIs to that, net working capital in percent of sales came in with 5.8% and this is significant improvement also here compared to the prior year quarter of 170 basis points.

I will comment on that a little bit later when I come to the three divisions in detail. On top, please note that this quarter, we have adapted our definition of net working capital and here now also including other customer and supplier-related payables and receivables, and we have implemented this change in order to enhance our transparency on our customer and suppliers.

Our investor relations department will communicate the revised figures for 2012 on the individual quarters and the course of the day. Our free cash flow came in with €209 million being below the previous year quarter by 9.1%.

And finally, our net financial position in million euro came in with a plus €114 million and by that being up €1.3 billion compared to the Q1 2012. Let me now go a little bit more into the details and starting with our sales growth.

Sales came in at €4.033 billion and being reported up in that respect by 0.6%. Our organic net sales growth was plus 2.5%, price contributing by 160 basis points, while volume was up by 90 basis points.

As it, you’ve heard it, a headwind in that respect, minus 2.0% negative impact especially by currencies like the Japanese yen, Brazilian real, Egyptian pound, and also the US dollar and M&A, more or less neutral washing out effect about divestments and smaller acquisitions we took during the Q1. Moving now further to the regional performance to sales and first starting with the emerging markets.

Emerging markets came in with a very strong number of plus 8.2%, reaching the level of €1.728 billion, and this led to an emerging market sales share at 43%, being up 200 basis points compared to the Q1 2012. In our mature markets, we had a decline, reaching €2.267 billion increased by minus 1.5% in organic net sales growth.

Let me now look or share with you the details of our individual regions, starting with Western Europe. Western Europe remains strongly impacted by the negative economic environment, especially impacted by our Southern European development coming out with a minus 1.0% in organic net sales growth.

Here, our HPC businesses, along with home care and beauty care were positive. Adhesives, in that respect was negative.

Moving to Eastern Europe. Eastern Europe being up strongly by plus 7.3% to a level of €718 million strongly driven by our performances in Turkey and Russia.

Middle East/Africa showed a double-digit organic sales growth of plus 18.2% despite political and social unrest we are facing. North America, you have already heard it, in that respect, minus 0.4%, not satisfying development.

But also here, our HPC businesses, laundry, home care and beauty care showed or recorded the ninth consecutive quarter of positive OSG growth while our adhesives business was below the previous year. Latin America, a solid growth of plus 4.5%, especially driven by Mexico and Brazil being here the main contributors.

And you have heard us reporting in the last year especially Brazil. We were not satisfied with our development in our consumer adhesives business.

And here, as I pointed out, a solid development we see here first time of recovery after the not satisfying development in 2012. Finally, Asia Pacific being up 1.3% to a level of €580 million.

Here, a solid development in China, Japan, below the previous year levels. With that, I would like to move now to the income statement adjusted and first report on sales to gross profit.

Sales reported were up by 0.6% to the level of €4.033 billion. Our cost of goods amounted to around €2.1 billion and by that leading to a gross profit in absolute term of €1,961 million being up over proportionally compared to the sales by 3.8% and that led to a margin, a gross margin in percent of sales of 48.6% being up 150 basis points.

This is, we even reached that with a negative effect of our cost of goods of around 50 basis points and especially due to our strong countermeasures and disciplined execution of our measures. With that continuing in our income statement adjustment now looking gross profit to EBIT and starting with our marketing, selling and distribution expense.

You’ll see an increase of 60 basis points to a level of 26.9% related to sales. Our selling and distribution expenses have been flat so the increase of 60 basis points is completely related to higher marketing expenses and you heard Kasper already explained to that to support our top brand, our innovation and laundry and home care as well as beauty care significantly increased the marketing expenses in Q1.

Our admin expenses are on the level of 4.8% related to sales and by that being up 20 basis points compared to the prior year quarter. And this is half due to one-time effect and half due to investments in our infrastructure in our emerging market and by that strengthening our regional hub.

With that, we reached an EBIT of – adjusted EBIT of €600 million and that led to an adjusted EBIT margin as already pointed out of 14.9% and with that being up 120 basis points supported by all three business divisions. Let me now move to our development regarding our net financial position.

And here also a very strong and positive development reaching now not the net debt position anymore but a net cash investment of €114 million and compared to the Q1 2012, being an improvement of around €1.3 billion in that respect. Let me now move to the three business divisions, and here into the financials of the three and starting with laundry & home care.

Regarding sales, we have a very strong quarter in laundry & home care being up 8.0% in organic net sales growth, reaching a level of €1.177 billion and the OSG was set up by five, contributing of 2.7% points and volume of 5.3% All regions were contributing to this development, our emerging markets showed double-digit improvement and also regarding our business segment, laundry & home care both showed strong development. Moving to our adjusted EBIT margin, also here a strong improvement 15.0% is the adjusted EBIT margin in Q1 2013, being up 50 basis points, impacted – positively impacted by the improvement of our gross margin and as you heard it before, despite the fact that we increased our marketing expenses significantly.

Final, KPI I would like to comment, is also here, the net working capital, as I said it before on Henkel. Also here, you see a very positive development to a level of minus 3.8% related to sales being improved by 70 basis points and reaching here also a low level for Q1 we have ever seen.

So, overall, a very financial – healthy financial KPIs in all dimensions. Moving now to our beauty care business, also here we showed a strong overall quarter in total.

Let me start first commenting on the organic net debt growth. Also here, an improvement by 4.0% compared to the previous year quarter now to a level of €873 million.

Pricing contributed 0.8% while volume was up 3.2%. Like in laundry & home care, all regions were contributing to this development.

Also here, emerging markets with a double-digit improvement. Let me comment to the businesses a little bit differentiated.

Our retail business showed a strong development in that respect. Our professional business was negative compared to the previous year quarter.

But also here, I think to be highlighted also in the professional business our emerging markets showed a double-digit improvement and despite the fact that we had a very declining professional market, we were able to overall increase our global market share. Moving now to the adjusted EBIT margin, also here, a significant increase by 50 basis points now to a level of 14.9% adjusted EBIT margin in relation to sales.

And our net working capital as you have seen it with laundry & home care also here improved 80 basis points also to a record low levels of 3.4% for Q1. Moving to our last business division, adhesive technology and here you have heard a differentiated picture.

Overall, we are not happy with our top line. However, all other KPIs and specially, adjusted EBIT margin and net working capital, we are very happy with this development.

But let me start with the unhappy part with the sales development. OSG came in with minus 1.2%, pricing contribution positive 1.3% while the volume was down by minus 2.5%.

Here, our businesses, as Kasper have already explained it, had been negatively impacted by the weakness of major industrial sector especially in Western Europe but also the slow start in North America as already commented on so de-stocking on the one side but also weakness in execution on the other side. Regionally speaking, our emerging markets showed a solid growth while mature markets remained below the previous year.

To the happy part now, adjusted EBIT margin and a significant improvement impressive by 210 basis points up to a level of 16.5% related to sales from the 14.4% of the previous year. Here, its improvement regarding gross margin, strong execution of cost discipline and also our portfolio sheet helped us in order to get to the development and finally also our net working capital development minus 160 basis points also here to a record low level when it comes to net working capital in the first quarter with 13.6%.

With that, I would like to hand over back to Kasper.

Thank you very much, Cartsen. Let me now summarize and come also to the outlook.

The summary for the first quarter mixed growth dynamics with a strong growth in HPC and adhesives negatively impacted by a weakness in mature markets and the slowdown of North America that we have mentioned on several occasions during the call. We saw increased efficiency driven by supply chain and also a very strong focus on cost.

The adjusted EBIT margin at all-time high driven by all three businesses. Adjusted EPS with growth about 10% and net financial position significantly improved.

Overall, a strong quarter in a challenging environment with the comments that we already mentioned. How we look upon the outlook?

We believe that the global economic outlook will continue to remain difficult. We see improving development for major industrial sectors expected during the second half of the year, predominantly outside Europe.

We see strong innovation pipelines to continually outperform the challenging market environment in our fast-moving consumer goods business, and we also expect consistent headwinds as it relates to currency. However, despite the difficult market environment, we are confirming our guidance for 2013.

That means organic sales growth between 3% and 5% and adjusted EBIT margin around 14.5%, and adjusted earnings per share of 10%. That also means, as we’ve done in the past, we will continue to adapt our structures to the market to ensure that we continue to drive the improvements in our earnings in a sustainable way moving forward.

What are the upcoming events? On June 18, we have our Investor and Analyst Day, which this year is focusing on our adhesive technologies.

This will take place in Düsseldorf. On August 8, we will disclose our second quarter financials.

And November 12, it will be time for the third quarter financials. This brings me to the end of the conversation or to the presentation, and I like, now along with Carsten, to take the questions you might have.

So, let’s please go over to the question-and-answer session.

Yes, good morning, everyone. I’ve got two questions.

The first one is on household. I think 8% like-for-like growth is your best quarter in household since first quarter 2007.

And I think as you note in your statement, this is happening despite still weaker market environment. And I think if I look around the competitive landscape, unless your name is P&G, everyone is having a fantastic run in terms of household growth.

Could you maybe just help explain why we are seeing such high absolute growth in this segment even if overall market growth rate is relatively subdued and therefore, how can that help us understand where the growth dynamics here goes next? Secondly, in adhesives, as you said, disappointing start in terms of growth but not margins.

You are flagging that Q2 will be better. But I also note that your outlook is guiding for 3% to 5% like-for-like, not just for the group, but actually for all of your divisions, therefore adhesives.

Are you therefore flagging that you still believe that the adhesives unit will have a very strong like-for-like turnaround in Q2 and for H2 in order to reach that goal? Thank you.

Good morning, Harold. Thank you for your questions.

With that, let me start with the second one and then go to the first one. I am confirming the guidance, and as I said, we are confirming the guidance on a company level and on a divisional level.

So that’s our current expectations. If you look around and look upon the development, I was very clear in articulating, we’re actually quite happy with the adhesives division in all reasons but one, and the one we flagged was North America which we do believe that the kind of performance out in North America was not 100% related to the market.

There was a destocking taking place and approximately 15% of our inventories went down. That was one.

And as I said, we are not happy with the execution in North America, and we have been – and you’ve covered us for a long time, you know that we’re trying to be very transparent on what we’re happy about and not happy about. We were “not happy about the performance of our own team North America in the first quarter.”

And that means that we are confident that we’ll get back into the range that we’ve spoken about before and also get back into a plus and that would then start in the second quarter. What I do want to stress though is that you should also look upon the quality of earnings, and we have consistently also stressed that we’re managing our portfolio very diligently to ensure that the quality of earnings continue to improve.

That’s not an excuse by any means, but that is what we’re seeing in the earnings that are coming out. So, we are foregoing some revenue on the top line because we want to make sure that we compete where technology made up the most.

That does not mean that we’re walking away from the guidance. So the guidance is still 3% to 5%.

The predominant driver of it was North America. One overall impact on a global basis was guidance industry.

That is expected to come back but you can follow the overall guidance with your times also. So, yes, we’re expecting it.

That’s the short answer. On laundry & home care, the market is growing.

We are seeing a market growth. But a lot of our growth is coming out of the emerging market.

So, we are seeing very, very strong growth in emerging markets with also in the mature. And that is coming on the emerging markets, from market and market share matures growing, much less is in decline but we are growing our market share and a lot of growth from the laundry care is coming from Eastern Europe and Middle East with very, very strong numbers.

So, it’s a market share gain in a market that mature is declining and emerging is growing. So, we’re quite happy.

I will have a say that I think the 8% is on the very up line range. I would not expect 8% to continue throughout the year just to set expectations but we continue to expect a strong year for our laundry & home care but not at the 8% range.

I think that was a very strong quarter.

Yes. Thank you.

I mean, just a final follow-up, what you’re effectively saying is the delta on the growth in household is essentially share gains rather than a change in market dynamics. Just a quantum of the change.

Confirmed.

Thank you very much. Have a good day.

Yes. Good morning.

My first question is on your outlook for the year. I noticed that you are saying that the outlook will depend on pricing realization.

So, could you give us which I think was at – in February when you gave the outlook. So, can you explain why you did that?

And also can you remind us what’s your expectation from raw material inflation as I understand that overall we are quite a stable raw material environment? So, I’m a bit surprise by those pricing comment.

And then my second question is on China. Can you share with us maybe a qualitative or quantitative comment on performance and how was your cosmetic performance versus your adhesives performance in this market?

Thank you.

Carsten will do the raw materials. Let me just be very clear.

Guidance is 3% to 5%. There’s no change in that.

That doesn’t depend on anything. So I don’t know where you have that coming from.

If it’s coming from us, it is not appropriate but I don’t think it’s come from us, so let me just reiterate what I believe was said all the time. Top line 3% to 5%, EPS 10% and margin 14.5%.

That’s the guidance. Period.

And no comments to us. That is the guidance as it stands and that is not depending on anything.

That’s the guidance.

All right, so, on your release, it says the guidance is based on anticipated increases in Henkel’s selling prices and ongoing adaptation of structure. That’s on the release.

Yes. But of course, what we do is we always adapt our structures.

We always do pricing.

Yes. I just think that this was not put – was not there when you put the guidance two months back, so I just...

Okay. So let me be clear, Celine.

The guidance is 3% to 5% and 10% EPS. Period.

So if there’s anything that’s misleading, I’m now non-misleading. It is the way we are saying it, 3% to 5%, 10% and 14.5% period.

And China, what we are seeing is that, overall, the Chinese market has continued to be very strong. On the consumer side, we are seeing no solid, very, very strong for us.

So on the beauty care business, we continue to report double digits in China. On our adhesives division, overall, strong.

The only negative is, right now, the electronics division or electronics business which is a global market than anything else, so we’re still very bullish on China. Electronics is the one we are flagging but that’s really a global, what you call this, which is the manufacture in China so it’s not really related to the China market in scope that’s in isolation.

Carsten, on the raws?

On the raw materials we have no change in our guidance which means we see a moderate increase for the full year of 2013. I reported on the Q1 that cost of goods being impacted negatively by 50 basis points, for sure, overcompensated by related countermeasures and improvement, but nothing changed regarding to that.

All right. And just then – therefore we’re getting to that, because last year inflation was quite much higher in the previous years and you had put prices up.

What do you think is the outlook for pricing in general for your three divisions for the year?

We don’t advise specifically on the pricing. What we do is always a combination of pricing and volumes to drive our business and this is valid for beauty care, for laundry and adhesive.

And for sure, with our innovations, you know that we have changed our definition last year, where we put in our fast-moving consumer businesses, innovations we’re having an improvement on average in the GP1 compared to the normal portfolio and that is the part which is related also to pricing and, as I said before, combination of pricing and volume of three divisions for the full year.

Thank you.

Yes, good morning. My first question would be back again on laundry.

You seem to comment that you think the 8% drag in Q1 is not assuming in coming quarters, however, it seems to me that your – from a comparison standpoint in the coming quarters, the base is not that much different. So, just wondering why you seem to be a bit conservative on that side.

Is it because the rollout of your innovation was more skewed towards Q1 this year or is it because you think that competition might heat up a bit more in the coming quarters? And secondly, on the cash flow development, your free cash flow was 9% down on the quarter.

Could you elaborate a bit more on what happened there? Is it mainly driven by lower than expected sales?

And how do you feel about your inventory situation? Thank you very much.

I’ll take the first question, Carsten will take the second. 8% is an extremely high number in the market that we are in when it comes to laundry & home care growth.

And of course, we launched products throughout the year but we’ve had a bigger launch activity in the first quarter. So that’s why we expect a somewhat slower growth.

What you have, however, seen throughout 2012 has been very strong growth rates in laundry & home care. We continue to expect strong growth rates in laundry & home care.

I’m just saying that the expectation, I think the 8% is on the high side. That doesn’t mean that we are going to go to a merry down but it will be lower.

The overall aim is to continue to gain market share which we have done. But from a – we think it’s launch-driven it will be tad lower in the following quarters.

Regarding your cash flow question, the decrease, the 209 versus the 230 in comparison of the quarters was due to the decrease in our operating cash flow. We could increase the – there was an increase related to the operating profit but this was offset by higher outflows for trade account receivables and also inventories.

And in particular, in inventory. So is that any special development in any of your three divisions?

Thank you.

No. Not a special development.

Thank you.

Hi, good morning. Two questions for me please.

The first one is on Asia Pacific. I was surprised by the weak growth that you have in Q1 despite the solid growth in China.

Can you just remind us the split by division in the whole region and remind us also the weight of Japan and China in the Asia Pacific sales? And my second question will be on adhesive.

You mentioned North America as a region that is expected to recover in the coming quarter, but do you expected the region to recover also in the rest of the year? Thank you.

In Asia Pacific, the split is pretty much 80/20 or 85/15 where adhesive is less the less majority part. The negative drivers for our growth in Asia Pacific are the mature countries being Japan, Australia, and New Zealand.

And that is a predominant driver for the lower growth rate that we’re seeing in Asia Pacific. When it comes to North America, as I indicated or Carsten also, we actually believe that the overall economy in North America is solid and will continue to evolve positive throughout the entire year and as we also stated, the two main drivers for the dissatisfactory development of our adhesive business in North America was inventory build-off and weak execution.

We don’t believe that those two are sustainable so to speak and we’re very confident that we can turn that around and get in and have a development that is aligned with the overall development of the economy in the US. So we are not, by any means, concerned about the economic outlook of the US.

But do you expect other regions in the world to recover for adhesive technologies?

Say it again? I’m not sure I understand it.

Do you expect those regions in major markets or in emerging markets to recover for adhesives?

I don’t think there’s any of those from an emerging standpoint that are not recovering at this stage. The only reason that has a negative impact is China through electronics, but electronics is globally driven.

That is not – particularly, it’s manufactured in Asia but it’s driven by the rest of the world. I don’t see any of the other regions being impacted.

We have a very strong business in Eastern Europe, in the Middle East. As Carsten indicated, Latin America is on a good run.

The predominant problems or challenges we had with Western Europe which is recession driven in North America which is income driven.

Okay. Thank you.

Thank you very much. Good morning, gentlemen.

A couple from me, if I may. Firstly, the impact of destocking on US adhesives, could you quantify what the impact of that was on adhesives division as a whole in the quarter?

I know it’s difficult to sort of get it precisely but any attempt to quantifying that would be very welcome. And secondly, just going through your P&L, there seems to be a €25 million increase in other operating income that accounts for pretty much all of your margin sort of beat versus consensus.

Now, I’m assuming that’s nothing to get too worried about because the gross margin did very well, but any color you could give on the components of that would be extremely helpful. Thank you.

I cannot give you a lot more detail on the North America situation. What we said is that the inventories was reduce with approximately 15% and the other part was execution, whether it’s 50/50 or 60/40, when you look upon the overall impact of the two, I can’t tell you.

So, I can’t give you – shed you much light on that, but as I said, 15% inventory reduction has been in North America in the first quarter, but also execution was not stellar. That’s really the only thing we can say at this stage.

Carsten, please?

Yes. Regarding other operating income, other operating expenses, we have seen it on the chart.

The impact is 0.6% while the increased size is €23 million in the balance and this is related to an impact of €13 million more in operating income, but there are several minor topics which are related to that and regarding operating – other operating expenses, we have €10 million less than in the previous year and that together is the balance of the €23 million. But as you also pointed out, we have a strong improvement in our gross margin and a strong cost discipline which brought us to the adjusted EBIT margin which we commented on for all three businesses being very high.

Thank you very much. Just to seek clarification, when you say 15% inventory reduction in North America, do you mean 15% of your North American adhesive sales was the quantum of the adhesive production or for 15% of what?

Thank you very much.

15% of the inventory that the channel holds in North America. So, we don’t quantify which level of inventory they hold, but we have seen a lot of our business in America is running through distribution, and distribution and large customers have reduced the inventory with approximately 15% in the quarter.

Thank you very much.

Yes, good morning. Two questions remaining.

First of all, on the gross profit improvement, then in combination with the EBIT margin improvement at adhesives. Am I right that the raw material cost has declined?

So, when I look at, yes, epoxy resins or all kind of raw materials for IT, as I see declining costs and therefore, there should be in effect for you as well. Can it quantify how big that effect was than on the EBIT margin improvement?

And then secondly, you said in electronics that – so far, that they’re still very weak. When do you expect the recovery?

Should you expect this in the first quarter already or more than in the second half? That’s all from my side.

Thanks.

So regarding the gross profit, yes, for sure you have seen that we have an increase in all three divisions regarding our raw materials. I think I already commented on that.

We had an impact of 50 basis points overall on Henkel. We do not list that regarding our division, so there is no decline in – at this point in our development of our raw materials.

And this is also in line with our guidance with the moderate development over the year. And we are improving that by, as I said before, by countermeasures, by disciplined execution, by innovation which is bringing this up and for sure, also, when it comes to the EBIT margin, it’s also regarding portfolio optimization and also cost discipline which brought us to the level where we are in the three divisions.

When it comes to the electronic market, we expect that to more be a second half year instead of second quarter. What we are seeing and as you saw the or what you can see also the significant slowdown in the PC market with 14%.

Basically, what you’re seeing is you are seeing a change from PC going to tablet. And that slowdown is taking place because the tablet uptake has not occurred to the extent that it should.

If you follow the Windows 8 debate and already, the now proposed changes to Windows 8 that has had an impact on the slowdown of the overall PC market. So we saw vendors like Hewlett Packard declined 25% I believe, vendors like Dell declined 12% to 14% and that’s simply because the PC market is slowing down and we’re not seeing the corresponding uptake on the tablet predominantly due to the mixed reception of Windows 8.

So, that’s one side of the coin. The other one is also new product launches in the smartphone market.

You saw the two companies that are really dominating that market have different announcement dates. Samsung came out with their Galaxy here in the first half and right now Apple is normally expected to do a lot of their launches in the second half and that’s pretty much why we believe that according to the market’s position is that the market will pick in the second half but it will be more second half than second quarter.

Okay.

What I do want to say though is it has very – no, nothing. That’s fine.

Thank you.

Good morning. Just one question from me on your margin guidance.

For the full year, the run rate implies half the margin expansion that you’ve achieved in the first quarter. I’m just wondering what dynamics are different over subsequent quarters to result in that.

It’s a different product portfolios drive different margins. And what we are guiding is we are guiding a higher level of shares as you can see, right now running 2.5% in our guidance to be within 3% to 5%.

So we expect certain of our product categories to grow quick on the second half in countries where you are seeing a lower margin so we expect predominant guidance. We’re focusing on the EPS of 10% and that’s really the overall focus to give credibility and also had a very clear expectation that the 10 EPS is the dominant driver for our guidance and that’s what we mentioned our business around.

Whether it’s 14.4, 14.6 or whatever it is, is too early to say because we are driving a predominant way of managing the business on the 10 EPS.

That’s very helpful. Thank you.

Good morning gentlemen. I just wanted to come back on what is clearly a lot of noise around the adhesives division.

I mean, we’ve got continued pruning going on as well. I know that last year that contributed as much as 100 basis points at times to drag on organic sales growth.

Is it possible to give us some color on the quantification of that in this quarter? And then in addition some comment I saw Scrollbar and the Newswire this morning there were some comments being made about acquisitions in mature markets.

And I’m just wondering if you could give some color on what types of acquisitions you’ll be seeking and in what particular mature markets. Thank you.

So, the overall impact on the portfolio is approximately 40 to 50 basis points. So, that’s not the magnitude.

It’s in rotation level but doesn’t make it much better. That’s why we’ve been very clear on what we believe is predominant impact on the overall market.

Of course, Europe, I’ve very clear on, is not an expectation to us. There is a substantial decline in the overall European industry.

But that’s not a surprise. We don’t expect that to turn around either.

So, it is really the 40 basis points is what the portfolio has. So, that get it down to minus one and then it’s pretty much a North America scenario right now.

And in electronics, these are the two overall reasons for it. When it comes to adhesives, you might know – acquisitions, excuse me, basically the point I made to the press was one, we have a very solid balance sheet that Carsten has talked about, we’re debt free.

Secondly is that if you look upon the areas where we’re acquiring it is in technology areas when it comes to adhesives, and it comes through category position when it comes to fast-moving consumer goods. The predominant firms that are active in the adhesives markets are headquartered in mature markets.

So, I’m speaking about the origin of the headquarters. That’s where most of adhesives are headquartered.

So by default, if we were to acquire an adhesives asset, it would “be headquartered” or the headquarter of that company would be in the mature markets. When it comes to fast-moving consumer goods, it’s simply the quality of the assets.

And the quality of assets, the further you move into the “immature markets” the more volatile those assets are becoming. However, you just saw that we acquired two assets in fast-moving consumer goods in the emerging markets.

One was in Latin America or Middle America and the other one was in Poland and in Russia.

Okay. Thank you very much.

Good morning. Couple of questions for me.

Firstly, on US laundry detergent, one of your competitors that actually dominate the value segment in the US has talked about substantial distribution gains. And it seems that these gains have come through at the end of March, early April.

So, my question is given that Purex is essentially a value brand, I was just wondering whether you’ve seen any impact from that on your numbers which could explain why you haven’t raised you full year guidance for your laundry & home care division. And secondly on the Eastern Europe, I mean one of the key moving parts here in Q1 is usually the weather because of your construction adhesives business.

Now, I know it’s always a difficult exercise but we know the weather was quite poor in Q1, so could you quantify the negative impacts of that on your numbers? And still on Eastern Europe, some of your beauty peers have mentioned a slowdown in the cosmetics market in Eastern Europe in general, but Russia in particular.

Just wondering whether you’ve seen the same trends. Thanks.

I will start with the second part of the questions and Carsten will take the first part of the question. I actually just like read about lifestyles in Eastern Europe when I was in Poland, Russia, and Ukraine.

We simply don’t use the weather as a reason for numbers. Some winters are cold, some winters are warm, and the weather is the way it is.

So, that’s why we just don’t use it and you won’t find it in our comments and we’re not going to use it. The weather will vary over time, but over a number of years, the weather is the weather.

So, that’s pretty much the way we see it, so no comment to the weather. We are seeing a slight slowing down in the Russian market at this stage because of the overall slowdown of the Eastern European economy.

But Russia’s constant debt remains a double-digit growth market for us overall. It’s an extremely strong market and continues to have a – we’re very bullish on Russia.

I think we’ve been clear on this for a long, long period of time and that has not changed and whether there’s a slight within the market, we can’t rule out, but overall, we’re very bullish on the overall Russian market.

Regarding laundry and homecare in North America, I can only comment on the quarter one and not on topics which are happening in April. And as I said before, both businesses, laundry and homecare and beauty care, showed organic, positive organic net sales growth in Q1 and it’s also related to our brands behind and we do not guide, explicitly give information on the development of a single brand.

And in that respect, as I said, we are satisfied with our top line growth and nothing else to comment on that.

And just a quick follow-up on the US laundry detergent, I mean, there is the big shift happening towards more unit. Just wondering if you managed to capture a good market share in that fast-growing segment.

In that respect, our situation is not significantly changing, being flat.

Thank you.

Thank you very much. Thank you for allowing me a follow-up question.

Just on laundry, if I may, with your sort of new Duo Cap products, what we’ve seen from you previously is that when you have a big innovation in laundry, it can really change the performance of that division for a good three quarters. So, I just wondered if you were able to give any indication as to how excited you were about Duo Cap as an innovation, this multi-chamber system.

And secondly, sorry to come back to it, but that €38 million of other operating income that you had in the first quarter 2013, that is quite a high number. It will be great if you could just give us a little bit of an indication of the sort of things that went into that and what it s component parts were.

Thank you very much.

On the laundry side, let me just try to answer the question a bit broader first. First is that right now, we have a number of innovations that are very successful in the market.

The Duo Caps is one. We also have a very successful set of innovations related to the bathroom or the toilet to be more specific.

So, it’s not just one set of innovation. We have right now, a set of innovations that are helping to drive the growth.

We believe that the Duo Caps category will be a sustainable category. It’s not one that comes and goes.

And we are consistently expanding our manufacturing capacity for this. This is a category that started in Europe approximately four years ago, in France, and is pretty much across all Eastern Europe and Western Europe at this stage with a number of different variations in the product that we offer into markets.

We are quite excited about it. We are investing heavily not only investment into the brand, but we are building – as we speak, we are building our expansion and expanding our manufacturing capacity in this category in Western Europe, Eastern Europe and also in the US.

So we are quite excited about it. It is a category that we believe are there to stay.

And the interesting part is it is really a global category. It’s one that is taking its – taking off in Western Europe, very strong take-off in Eastern Europe.

If you go to Eastern Europe and you go to the major retailers, you will see it across in all the shelf in the large retailers and the same in the US. I was in Brazil last week also and you those are there.

It’s a very strong category. We are quite excited about it.

When it comes to other income expense, I’ll let Carsten comment on that.

Yes. Again, to the point operating income, operating expenses.

As I pointed it out before, regarding the operating income that many minor topics which I will not comment on but to give you some more flavor in the operating other expenses. There is one bigger item in that respect who is making half of that which is the currency losses in Venezuela which we experienced last year which did not repeat or did not occur in 2013 and this is what I would like to comment on that.

Thank you very much. That’s very clear.

Just very, very, quickly. Was there any impact from pipeline sale with Duo Caps or has that always been quite big.

You haven’t filled up a pipeline that’s helped explained the laundry top line? Thank you.

No. That’s not the case because Duo capacity in the market for a long period of time for us.

It is not a “new innovation”. It’s innovation that we continue to expand upon, so there is no pipeline filling at this.

This is a run rate business as we go.

Thank you very much.

Thank you from me and Carsten for participating in our conference call today. Overall, first quarter EBIT mix was strong quarter on the background of a difficult market environment.

I hope that we’ve given you enough substance to explain the one big question you have. And we’re very confident that we’ll hit our guidance for 2013 and meaning that we’re confident for the remainder of the year.

I wish you all the best and we look forward to meeting you at our Investor and Analysts Day for the adhesives technologies on June 18 here in Düsseldorf. And with this, thank you very much and bye.